Bills Digest no. 187 2006–07

Product Stewardship (Oil) Amendment Bill
2007

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

The purpose of the Product Stewardship (Oil)
Amendment Bill 2007 ( the Bill ) is to amend the Product
Stewardship (Oil) Act 2000 (PSO Act). The PSO Act establishes
the general framework and benefit entitlements of the Product
Stewardship for Oil Program (PSO Program). The Bill seeks to

replace the existing term waste
oil throughout the PSO Act with the new term used
oil so as to promote consistency with the object of the
PSO Act

permit necessary regulations to be made for the
purposes of subsection 10(1) of the PSO Act, so as to ensure that
the re-refined oil which attracts the product stewardship (oil)
benefit is based on the most up to date quality criteria

provide that members of the Oil Stewardship
Advisory Council (other than members appointed to represent the
Commonwealth and the Commissioner for Taxation) will be appointed
on the basis of their knowledge of, or experience in, a range of
prescribed subject areas relevant to product stewardship
arrangements for oil

provide that members of the Oil Stewardship
Advisory Council appointed to represent the Commonwealth and the
Commissioner for Taxation will not have voting rights so as to
remove the potential conflict of interest between their two
positions, and

strengthen and make more demanding the
procedures for the disclosure of direct or indirect pecuniary
interests by member of the Oil Stewardship Advisory Council, and
for ensuring that such interests held by members do not jeopardise
the provision of quality advice by the Oil Stewardship Advisory
Council.(1)

The PSO Act is the legislative basis for the
Product Stewardship for Oil Program (the PSO Program). The
Product Stewardship (Oil) Act 2000 came into effect on 1
January 2001, as part of the Government s May 1999 commitment to
A New Tax System -Measures for a Better
Environment package.(2)

The PSO Act is designed to ensure the
environmentally sustainable management, recycling and reuse of
Australia s used oil. It provides for the payment of benefits to
used oil recyclers as an incentive to increase the volume of used
oil collected and recycled in Australia .(3)

The Department of the Environment and Water
Resources website offers the following information about the PSO
program.(4)

Oil is a valuable and finite resource. Each
year, more than 500 million litres of lubricating oil is sold in
Australia. Of this amount, at least 250 million litres of used oil
is generated by industry and the community and is available for
recycling.

Supported by the Australian Government's Product Stewardship
for Oil Program, Australians recycled approximately
194 million litres of their used oil in 2003. Even though this rate
is high, between 60 and 100 million litres remains unaccounted
for.

We don't know what happens to this 'missing oil'. However,
anecdotal evidence suggests it could be:

Sitting in temporary stockpiles (eg in the
garage or shed);

Retained in waste or scrap equipment (such as
vehicles);

Lost to the environment at collection points
(eg leaking, spills etc).

The improper use of used oil can pollute land,
waterways, underground reservoirs and the marine environment. One
litre of used oil can contaminate up to one million litres of
water.

Used oil is hazardous - toxic, carcinogenic and harmful to the
environment when irresponsibly discarded. It is also poisonous if
swallowed or inhaled and can present a fire hazard if not properly
stored.

The Product Stewardship for Oil Program has in place
arrangements providing incentives to increase used oil recycling in
the Australian community.

The PSO Act
requires an independent review of the legislation be done at
intervals of not longer than 4 years. Two reviews of the Product
Stewardship for Oil Program were conducted during 2004. The first
review was the Independent Review
of the Transitional Assistance Element of the Product Stewardship
for Oil (PSO) Program. The second review was the Independent Review
of the Product Stewardship (Oil) Act 2000 ( the
Independent Review ) and was conducted by the Allen Consulting
Group. The PSO Bill seeks to give effect to a a few of the
recommendations of the Independent Review relating to the
constitution and operation of the Oil Stewardship Advisory Council
(OSAC).(5) The OSAC is joint industry/government
advisory council established by the PSO Act and charged with the
task of advising the Minister for the Environment and Water
Resources on matters relating to the product stewardship
arrangements for oil.

The Independent Review in 2004 noted that:

There are concerns, about potential conflicts of
interest on OSAC. While perceptions of conflicts of interest will
almost always exist for industry-focused bodies, the actual risk of
there being a clear financial gain is harder to point to given that
OSAC only has an advisory role. This was certainly a point made by
the OSAC Steering Committee. However, a significant number of
stakeholders (including current and former members of OSAC), both
verbally and in submissions, suggested that preferential access to
industry information does at times raise potential conflict of
interest issues.(6)

[ ]

The Review Team considers that OSAC has a higher accountability and
transparency obligation than most advisory bodies because of its
legislative imprimatur. That is, because OSAC is established under
the Product Stewardship (Oil) Act 2000 there is a need to
hold to it to a higher standard of transparency and accountability
than for an advisory body that is otherwise constituted.

Other government bodies facing similar conflict of interest issues
have adopted best-practice meeting procedures in order to minimise
conflicts of interest.(7)

The review also made other recommendations, some
of which would require either legislative or regulatory changes.
These changes are listed below.

Recommendation 1

Greater efforts by Commonwealth departments and
agencies need to be made to ensure that statistics on the volumes
of oil produced, imported and sold are consistent and are
universally accepted as accurate.

Recommendation 2

The benefit rate for high grade burning oil
should be increased relative to the benefit rate for lube-to-lube
oil.

Recommendation 3

The PSO Act should be amended
to clearly provide that it does not apply to vegetable oils.

Recommendation 4

The PSO legislation should be
amended to require that the processes used by claimants of Category
1 benefits must include either thin film evaporation or vacuum
distillation, followed by either solvent extraction or
hydrofinishing. There should also be a provision to allow the
Minister to approve the substitution of other processes that are
able to produce comparable outcomes.

Recommendation 5

Subsection 14(2) of the PSO
Act should be amended to provide the Minister with greater
flexibility as to the size and representative mix of the Oil
Stewardship Advisory Council.

Recommendation 6

The PSO Act should provide a
formal mechanism for an alternative representative, at a member's
request, to temporarily deputise for that member.

Recommendation 7

The Oil Stewardship Advisory Council should
adopt clearer and more stringent conflict of interest
procedures.

Recommendation 8

The Department of the Environment and Heritage,
the Department of Industry, Tourism and Resources and the Oil
Stewardship Advisory Council should work with the oil companies to
identify cost-effective ways in which they can become more involved
in the product stewardship of oil in Australia.

Recommendation 9

There is a continuing need for the Department of
the Environment and Heritage and the Oil Stewardship Advisory
Council to raise the community awareness of the problem of used oil
and the PSO Program in order to further increase
recycling.

Recommendation 10

The Department of the Environment and Heritage
and the Oil Stewardship Advisory Council should work better engage
State and Territory environment agencies as part of the
PSO Program. Progress in enhancing this
engagement should be reported through the Environment Protection
and Heritage Council.

Recommendation 11

Given the need for the PSO
Program to move away from reliance on the excise system, unless a
comprehensive self-regulatory product stewardship model for used
oil develops over the next four years, the next independent review
should include a further examination of the use of a tradeable
certificate scheme for used oil.

In response to an issue raised during the
(first) review of the PSO Act, the Government implemented a change
to the Regulations in the reporting period. This change clarifies
the meaning of re-refined base oil under categories 1 and 2 by
providing a clear definition for base oil and specifying the
eligible processes for re-refined oil . The amendment also includes
flexibility provisions, enabling the Minister for the Environment
and Heritage to recognise equivalent technologies as re-refining
processes. This change, which came into effect on 14 February 2005,
reinforces the hierarchy of benefits, simplifies the administration
of the Regulations and provides clarity for industry
beneficiaries.(8)

The government response to the recommendations
from the two independent reviews of the programme is ongoing. The
government has responded to some of the recommendations and expects
to address others during the coming year.

The amendments
proposed in items 1, 2, 4 and 6
substitute the term waste oil with the term
used oil, the stated purpose being to provide
greater clarity and be more consistent with promoting the object of
the Act. Used oil was also the preferred term
adopted by the Independent Review.

Proposed
subsection 6(1) defines a voting member
of the Oil Stewardship Advisory Council to be one who is appointed
on the basis of their knowledge of, or experience in, one or more
of the areas referred to in proposed subsection
14(2). This means that members of the OSAC who are
appointed pursuant to proposed subsection 14(2B)
representing the Commissioner for Taxation and the Commonwealth
will not be voting members. This is designed to remove the
potential conflict of interest for OSAC members who are also
Commonwealth employees.

Item 5proposes the insertion of a new subsection
10(5) to allow regulations to be made for the purpose of
determining eligibility for the product stewardship (oil) benefits.
Such regulations may adopt or incorporate oil testing methods or
standards for the accreditation of laboratories undertaking oil
testing, as in force or existing from time to time. This is despite
section 14 of the Legislative Instruments Act 2003 (LI
Act). Subsection 14(2) of the LI Act provides that unless the
enabling legislation permits instruments to be incorporated from
time to time, an instrument may only be incorporated in the form in
which it exists at the date of incorporation.

The current regulation stipulate the test
methods for analysing re-refined oil so as to determine eligibility
for benefits under the PSO Act, and they obligate testing
laboratories to be accredited to a specified standard. Both the
testing methods and accreditation standards are revised from time
to time. Thus, in order to ensure that the benefits under the
program are being effectively targeted to re-fined oil, it is
essential that regulations that are used to determine eligibility
incorporate test methods and accreditation standards as are in
force or existing from time to time.

Operation
of OSAC

Item 7 inserts
proposed subsection 13(3) which provides that the
performance of a function of the OSAC is not affected by the fact
that the Council does not include any members appointed on the
basis of their knowledge of, or experience in, a particular area
listed in subsection 14(2) or does not include a representative of
the Commissioner or the Commonwealth appointed under subsection
14(2B).

Constitution of the OSAC

Proposed subsection 14(2) prevents the
Minister from appointing a person as a member of the OSAC (other
than as a member under proposed subsection 14(2B)) unless the
Minister is satisfied that the person has knowledge of, or
experience in one or more of the areas listed below.

broad waste management issues from a business
perspective

research and development relevant to the
product stewardship arrangements for oil

State or Territory government

local government

the non-government sector

national consumer issues

remote, including remote Indigenous,
issues

oil production

used oil recycling

used oil collection.

This is obviously designed to broaden and
secure a broad range of relevant expertise of the OSAC so as to
improve the quality of their advice. Indeed, in appointing OSAC
members, the Minister must endeavour to ensure that the
constitution of the OSAC reflects breadth of that range of
expertise (proposed subsection 14(2A)).

Proposed subsection 14(2B)
provides that the Minister must also ensure that the membership of
the OSAC includes a representative of the Commissioner and the
Commonwealth.

Disclosure of pecuniary
interests

Proposed subsection 15(1A)
forbids the Minister from appointing as Chair to the OSAC, a member
who has a direct or indirect pecuniary interest in the product
stewardship arrangements for oil if, in the Minister's opinion,
that interest could conflict, to a significant extent, with the
proper performance of the duties of the Chair . Proposed
subsection 15(1B) mandates that the Chair must notify the
Minister of any direct or indirect interest that he or she acquires
in the product stewardship arrangements for oil .

Proposed subsection
15(6) enables the Minister to terminate the appointment of
the Chair of the OSAC if the Minister becomes aware that the Chair
has a direct or indirect pecuniary interest in the product
stewardship arrangements for oil; and in the Minister's opinion,
the interest conflicts, or could conflict, to a significant extent,
with the proper performance of the duties of the Chair .

Proposed paragraph 21(2)(d)
enables the Minister to terminate the appointment of a member of
the OSAC appointed to represent the Commissioner or the
Commonwealth, if in the Minister s opinion, that member is no
longer an appropriate representative either because of a change in
employment, residence or other circumstances.

Meetings of the OSAC

Proposed paragraph 22(3)(b)
provides that a Chair must convene a meeting of the OSAC on receipt
of a written request from at least five other voting members.

Proposed section 24 provides
that a majority of voting members, or 6 voting members, whichever
is greater, form a quorum at a meeting of the OSAC
.

Proposed subsection 25(1)
provides that questions arising at an OSAC meeting are to be
decided by a majority of votes of the voting members who are
present and voting.

Proposed subsections 29(2) -
29(2C) provide for how disclosures of pecuniary interests
at OSAC meetings are to be handled and the requirement that such
disclosures be recorded in the minutes.

The amendments contained in this Bill are
designed to strengthen the OSAC s role as a source of independent
expert advice so as to maintain its relevance and better equip it
in meeting the objects of the PSO Act.

Juli Tomaras
20 June 2007
Bills Digest Service
Parliamentary Library

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